Jefferson Trust & Sav. Bank of Peoria v. W. Heller & Son., Inc.

• Decision Date: 18 June 1940
• Docket Number: Gen. No. 9377.
• Citation: 27 N.E.2d 844,305 Ill.App. 644
• Parties: JEFFERSON TRUST & SAVINGS BANK OF PEORIA v. W. HELLER & SON., INC., ET AL.
• Court: United States Appellate Court of Illinois

305 Ill.App. 644

27 N.E.2d 844

JEFFERSON TRUST & SAVINGS BANK OF PEORIA

v.W. HELLER & SON., INC., ET AL.

Gen. No. 9377.

Appellate Court of Illinois, Second District.

April 26, 1940.

Rehearing Denied June 18, 1940.

Appeal from Circuit Court, Peoria County; John T. Culbertson, Jr., Judge.

Action on a note by the Jefferson Trust & Savings Bank of Peoria against W. Heller & Son, Inc., and others. Judgment for defendants, and plaintiff appeals.

Reversed and remanded. Bartley & Younge, Shelton F. McGrath, and Theodore Baer, all of Peoria, for appellant.

Alvin D. Blieden, of Chicago, and Knoblock & Sloan, of Peoria, for appellees.

DOVE, Justice.

On September 5, 1933, W. Heller & Son, a corporation, by I. M. Heller, its president, and Sam Heller, its secretary, executed its note payable to the order of Jefferson Trust and Savings Bank of Peoria for the sum of $17,261.87 due ninety days after date, with seven per cent interest from date until paid. Payment of this note was guaranteed by Rufus A. Heller, Sam Heller and Israel M. Heller, who executed a written guarantee and warrant of attorney authorizing a confession of judgment against them on the back of said note. On December 23, 1933, the Circuit Court of Peoria County rendered judgment by confession on this note against W. Heller & Son, Inc., Rufus A. Heller, Sam Heller and Israel M. Heller for $18,602.05. Subsequently a motion to open up the judgment and allow the defendants to plead was filed and from an order denying that motion the defendants appealed to this court, which reversed the order of the Circuit Court. Jefferson Trust & Savings Bank v. W. Heller & Son, 280 Ill.App. 399. After the cause was redocketed in the trial court, pleas were filed and after the issues had been made up a jury trial was had, resulting in a finding and judgment for the defendants, from which the plaintiff has appealed.

From the pleadings and evidence it appears that prior to the 5th day of February, 1931, the State Trust and Savings Bank was a commercial bank organized under the banking laws of this state and doing a general banking business in the City of Peoria, with a capital of $200,000. In this record this bank is referred to as the old bank and will be so called in this opinion. On February 5, 1931, by order of the Auditor of Public Accounts, this bank, being insolvent, closed and never thereafter reopened for business. At this time its assets amounted to $1,864,210.10 and its deposits $1,371,111.74. W. Heller and Son is an Illinois corporation, engaged in the junk and scrap iron business in Peoria, with a capital stock of $50,000, which in 1931 was owned by Israel M. Heller, Rufus A. Heller, George Heller, brothers, and Esther Heller, the wife of Sam Heller, another brother. Each of said stockholders owned one hundred twenty-five shares of the capital stock of said corporation. Its board of directors was composed of Israel M. Heller, Rufus A. Heller and George Heller. Israel M. Heller was president, Rufus A. Heller, vice-president, Sam Heller, secretary, and George Heller, treasurer.

When the old bank closed 205 shares of its capital stock stood in the name of Sam Heller on the books of that bank, fifty shares of which belonged jointly to Sam Heller and Harry A. Frankel. Albert H. Kahler was also a stockholder in the old bank as was George A. Shurtleff. These men, with others, in order to relieve the stockholders of the old bank of their stockholders' liability and to enable the depositors of the old bank to be paid in full, organized a new bank known as the Jefferson Trust and Savings Bank, appellant herein, and also the Peoria Investment Company, both Illinois corporations. The Investment Company had a capital of $200,000 and the stockholders of the old bank, in lieu of paying their stockholders' liability of $200,000 subscribed for an equal amount of stock in the Peoria Investment Company. Sam Heller, upon the organization of the Investment Company, subscribed for 155 shares of stock therein, and he testified that when he did so, Harry A. Frankel fully explained the plan to him, that he understood it perfectly and thought the purchase of stock in the Investment Company would be a good investment. He did not have, however, the necessary $15,500 cash to pay therefor and neither did some of the other stockholders of the old bank. According to Sam Heller's testimony Frankel told him that he could pay for it by executing his personal note, which would be accepted in lieu of cash, and on October 17, 1931, Sam Heller executed a judgment note for $15,500, payable on demand to the order of John C. Wynd, trustee, said note bearing 6% interest from date until paid. This note was executed by Heller to secure the other makers of the Causey and Kahler notes aggregating $33,500 hereinafter referred to.

On October 23, 1931, Sam Heller and nine other persons, including Albert H. Kahler, George A. Shurtleff, Harry A. Frankel and John C. Wynd, who had subscribed for stock in the Peoria Investment Company, executed their note payable to the order of E. M. Kahler for $12,500 thirty days after date and on the same day Albert H. Kahler, George A. Shurtleff, Harry A. Frankel, John C. Wynd, Chester Swords and Sam Heller executed their note for $21,000, payable thirty days after date to Florine Causey. It was for the makers of these Kahler and Causey notes that John C. Wynd, payee of the note of $15,500 executed by Sam Heller on October 17, 1931, acted as trustee. The proceeds of these Kahler and Causey notes aggregating $33,500 was paid to the Commercial-Merchants National Bank of Peoria, and this bank, on October 28, 1931, acting as trustee for the stockholders of the Investment Company and having received the $200,000 from the sale of stock in the Investment Company credited the account of appellant with that sum. On the previous day appellant received its authority to open for business but did not do so until November 25, 1931. Under the provisions of the contract dated October 28, 1931, executed by the old bank and by the Investment Company and by appellant, objectionable assets of the old bank having a book value of $693,098.38 were transferred to the Investment Company in consideration of this $200,000 cash. The remaining assets of the old bank, amounting to $1,171,111.74, were acceptable assets both to the State Auditor and to the directors of appellant so that when appellant opened for business it had this $200,000 cash received from the Investment Company, together with the approved assets of the old bank, amounting to $1,171,111.74, both aggregating $1,371,111.74, and it had, under the provisions of the contract, assumed all of the deposit liabilities of the old bank, aggregating $1,371,111.74.

After the appellant opened for business E. M. Kahler and Florine Causey sold these notes aggregating $33,500 to appellant, and on December 28, 1931, these notes then in the hands of appellant and belonging to it were paid in part by the transfer of the Heller note of October 17, 1931, for $15,500 by John Wynd, trustee, the payee therein, who endorsed it without recourse and delivered it to appellant, who accepted it and credited the proceeds thereof on the Kahler and Causey notes.

Sam Heller testified that six or seven days after October 17, 1931, Harry A. Frankel informed him that he was having some trouble handling Heller's personal note of $15,500 and requested him to get the Heller Corporation to sign it. Heller stated that the corporation had nothing to do with it, that the obligation was his personal one and declined. On November 3, 1931, Frankel, Shurtleff and Albert H. Kahler came to the office of W. Heller and Son and had with them the note Sam Heller had executed on October 17, 1931. On this occasion, according to Sam Heller's testimony, Frankel said, “Now, Sam, you are holding the key to the combination. The bank can open up tomorrow if you will get the corporation signature on this note”. To this Heller testified that he replied: “This is a personal matter between the bank and myself and to please keep the corporation out of it”. Kahler then said: “There is no harm in doing it. It will just help open up the bank that much quicker. A personal note can not be considered bankable. At this time the bank examiners control the situation. We have to do as they say. When the bank opens up we will be the bosses of the situation, at which time you will get the corporation note back and we will take your personal note in exchange.” In reply to a statement there made by Rufus Heller to the effect that Frankel, Shurtleff and Al Kahler were not going to get the Heller corporation to put its name upon this note, Harry Frankel said: “What I am asking the corporation to do has no meaning as far as the corporation is concerned. You are just accommodating the bank to help them open earlier. A personal note is not bankable, the corporation note, if you would sign it, and make it a corporation note would be bankable and let us open up the bank tomorrow, won't you help us along that way? If you will put the corporation name to this paper, I will sign it to show you that there is nothing wrong or no harm can be done and I will get Bob Silberstein to sign it. This note is an accommodation to the bank and you will never have to pay it. It will be exchanged just as soon as the bank opens up for a personal note signed by you (Sam Heller), I don't understand why you hesitate. You are among friends. You know you have been taken care of before and you will be taken care of, as far as any trouble is concerned, in the future”. Sam Heller thereupon told I. M. Heller that he didn't see how the company could go wrong in helping the bank to open and I. M. Heller wrote beneath the name Sam Heller appearing thereon the words: “W. Heller and Son, by I. M. Heller, Pres.” At the same place and immediately thereafter Harry A. Frankel placed his name on the back thereof as did also I. M. Heller, and...